State regulators approve $13 million rate hike for Minnesota Power

Minnesota utility regulators have approved a $13 million rate hike for Minnesota Power, about 40 percent of what the company had been seeking.

Minnesota Power's residential customers will see a 3.5 percent rate increase with the action taken Tuesday by the Minnesota Public Utilities Commission (PUC).

"It's a very modest increase, especially when you look at what Minnesota Power was asking for," said Annie Levenson-Falk, executive director of the Citizens Utility Board, a nonprofit consumer advocacy group for energy matters.

When Minnesota Power filed its current rate case in November 2016, the Duluth-based utility was asking for an increase of $55 million in annual revenue, which translated into an 18 to 19 percent rate hike for residential consumers. The rate case filing was Minnesota Power's first since 2009.

The company reduced its requested increase to $39 million in March due to rising energy demand from the iron ore industry, Minnesota Power's largest industrial customer group. Minnesota Power said it later lowered its request again, this time to $32 million.

The Minnesota Department of Commerce instead recommended to the PUC that Minnesota Power actually reduce its rates by $16.7 million.

The PUC settled at a $13 million increase in annual revenue, which will also lead to a 3.5 percent rate boost for small businesses and increases of 1 to 2 percent for industrial customers.

"This is a very complex decision, and we will evaluate whether there are issues that require further consideration or clarification through the [PUC's] process," David McMillan, Minnesota Power executive vice president, said in a statement.

Minnesota Power is the primary business arm of Allete, a publicly traded company based in Duluth. The utility serves 145,000 customers in northeastern and north-central Minnesota.

The rate increase will take effect in late 2018. When it does, Minnesota Power customers should see a modest decrease in their monthly bills. That's because the PUC granted the company an interim rate increase of around 5 percent in December 2016. Minnesota Power customers will get refunds for the difference between the interim and final rate hikes.

Minnesota Power's residential customers also will not have to pay a 6.5 percent rate surcharge that was approved by the PUC last March. The surcharge was essentially a special rate increase that would help pay for a 5 percent discount in power rates to Minnesota Power's 11 largest industrial companies, most of which are taconite and wood products firms.

The discount stems from a 2015 law aimed at providing "competitive" electric rates to large energy consumers exposed to the vicissitudes of foreign trade.

The state's technology system has been plagued by high-profile failures, and finding someone willing to head the department has proven challenging. "It keeps me up at night," Walz said in an interview.